Mexico: Banxico to raise the policy rate 25bp to 7% - Rabobank

Christian Lawrence, Research Analyst at Rabobank fully expects Banxico to raise the policy rate 25bp to 7% on Thursday 22nd June.

Key Quotes

We fully expect Banxico to announce a 25bp hike to 7% on Thursday 22nd June.  If this comes to fruition it will mark the seventh consecutive rate hike from the central bank: five 50bp moves followed by the 25bp move seen at last month’s meeting. Our base case has been that Banxico would end the tightening cycle at 7%, but we see significant risk that we could see an additional 50bp of tightening later in the year.

“In terms of our outlook for the currency, we remain of the view that carry will continue to provide support for MXN. We see the recent rally as somewhat overdone but our call for a move above 20 this summer is now unlikely to come to fruition and as such we have revised down our USD/MXN forecast.”